Omani spending on agriculture sees the sector's contribution to GDP rise

Bold plans to improve food security and production in Oman are being driven by investment in agriculture, horticulture, aquaculture and sea fishing as the country looks for sustainable solutions that will enable it to support a growing population. The sultanate’s long coastline and diverse landscapes support a rich variety of fish, livestock, crops, fruit and vegetables.

However, over centuries the country’s farmers have also faced significant challenges in managing a limited, though replenishable, supply of water in a predominantly hot desert climate. As Oman increases food production targets, new technologies and farming systems look like they are set to play a crucial role in complementing traditional production techniques.

At a time of lower oil prices, the government has identified agriculture and fisheries as sectors that can expand to account for a greater share of GDP. The country would also like to see these primary industries play a greater role in improving its balance of trade in foodstuffs – something addressed in the ninth and final five-year segment of its Vision 2020 strategy, covering the 2016-20 period. In fisheries alone, the government aims to raise production from 257,172 tonnes a year in 2015 to 480,000 tonnes by 2020, creating 20,000 new jobs in the process. The five-year plan envisages a return of OR739m ($1.9bn) from fishing and fish processing facilities by 2020.

Contribution

Provisional data for 2015 from the National Centre for Statistics and Information (NCSI) showed growth of 5% in the contribution agriculture made to GDP at current prices compared to 2014, and 16.5% annual growth in fisheries. The data showed annual growth of 1.1% and -0.5% in agriculture and fisheries, respectively, in 2014.

In 2015 agriculture contributed 0.9% to GDP and fisheries 0.7%, or OR245.3m ($637.1m) and OR189.9m ($493.2m), respectively, for a combined total of OR435.2m ($1.1bn). Even as overall state spending fell from OR4.76bn ($12.4bn) in 2014 to OR4.72bn ($12.3bn) in 2015, the portion – both current and investment – spent on agriculture, forestry, fisheries and hunting grew by more than 15%, from OR95.1m ($247m) to OR109.8m ($285.2m), a sign of government emphasis on sustaining and investing in these sectors.

It would also appear that agricultural companies remain able to access credit from banks. Outstanding commercial credit extended to businesses in agriculture and related sectors increased by 7% from OR53.8m ($139.7m) in 2015 to OR57.6m ($149.6m) in 2015, according to the Central Bank of Oman.

Decade Of Growth

Records published by the NCSI show Oman’s agriculture sector in a decade of rapid expansion since 2006. This has been driven in part by growth in population, which swelled by 61% between 2006 and 2015, from 2.6m to 4.2m, with the number of Omani citizens increasing by 25% to 2.3m. Over the same period the area under cultivation grew by 30% to 82,750 ha, while the amount of food produced increased by 77% to reach 1.773m tonnes. Livestock surveys showed the numbers of cows, camels, sheep and goats in Oman rose by 22%, 110%, 60% and 36%, respectively, during the decade.

Fruit, Feed & Vegetables

The total food production figure of 1.77m tonnes in 2015 represented the third consecutive year of growth and an increase of 18% on the 1.5m tonnes grown in 2014. Output had grown steadily from 1.01m tonnes in 2006 to 1.47m tonnes in 2010 before declining in 2011 and 2012.

More than half (53%) of the food grown in 2015 was in the form of perennial fodder crops to be used for animal feed, which totalled 929,899 tonnes, a 23% increase on the 753,600 grown the previous More than half of the food grown in 2015 was in the form of perennial fodder crops to be used for animal feed year. Rhodes grass, which can tolerate both salty and drought conditions, accounted for more than 500,000 tonnes of fodder and was the largest crop in this category, followed by alfalfa at 278,037 tonnes produced and sorghum at 57,000 tonnes, with the remainder made up of other varieties. The data shows a 54% increase in the area of land used for fodder crops between 2013 and 2015, from 20,475 ha to 31,746 ha, with the areas planted with alfalfa and Rhodes grass expanding by 56% and 60%, respectively.

Vegetable crops accounted for 399,172 tonnes of produce in 2015, a 19% increase on the previous year. In this segment, tomatoes were by far the most popular crop with 116,408 tonnes produced, a 56% rise on 2014, while the area of land dedicated to tomato growing increased by just under 40% from 1296 ha to 1798 ha. The weight of cucumbers harvested rose by a third from 28,846 tonnes to 38,482 tonnes, despite a decline in the area dedicated to cultivating the crop from 42 ha to 27 ha. From 2013 Oman’s potato harvest increased rapidly, and in 2015 became its third-largest vegetable crop. In that period land used to grow potatoes expanded from 206 ha to 875 ha, and the tonnage of potatoes rose from 5067 in 2013 to 23,144 in 2015, an increase of over 350%. Not all crops were so successful, however: the cabbage harvest of 12,964 tonnes was down 27% on 2014, although the decrease in the area used to grow the crop was just 0.3%. Despite the ups and downs of annual harvest cycles, there was a clear trend to use more land for vegetable crops between 2013 and 2015, with a 41% increase in area from 11,580 ha to 16,350 ha, and a 27% rise in vegetables produced.

In contrast, the area used to grow fruit remained static for all varieties from 2013 to 2015, with just under 31,000 ha under production, 78% of which (24,120 ha) was accounted for by dates. In 2015, 412,604 tonnes of fruit were harvested in Oman, up from 404,400 in 2014 and 396,681 in 2013. The date crop weighed in at 325,314 tonnes in 2015, an increase from 317,404 in 2014. Productivity also increased over the course of the three years, with the tonnage of dates per hectare rising from 12.84 to 13.16 to 13.49. Over the same three-year period, there were year-on-year (y-o-y) declines in the harvests from coconut palms, lemon groves and banana plantations in Oman, while mango production increased.

From 2013 to 2015 there was a 30% fall in the area used for field crops intended for human consumption, such as wheat, barley and maize, from 5600 ha to 3910 ha. However, the overall tonnage of these crops produced in 2015 was 30,958, up from 28,140 tonnes in 2013. In 2015 the field crop harvest in Oman consisted of 2525 tonnes of wheat, 2313 of barley, 15,762 of maize and 10,358 of other varieties, which are not specified in the NCSI data.

New Top Crop

When the proportions of land under cultivation for different crops are compared, a shift in emphasis is detectable in 2015, with crops grown for animal fodder becoming the most important crop, rising from 29.3% of the total to 38.3%, surpassing fruit, which fell from 45% of the total in 2014 to 37.2% a year later. The proportion of land growing vegetables grew from 19% to 19.8%, and the land on which field crops were grown fell from 6.5% to 4.7%.

The decision to increase the growth of fodder crops may be due in part to the diminution of groundwater supplies in the coastal plains. Crop science researchers at Sultan Qaboos University (SQU) have seen farmers plant Rhodes grass because of its ability to grow in more saline conditions, but there is a downside. “In Al Batinah, between the highway and the sea, you can see the impact of increased salinity in the fields, but when the farmers started having a salinity problem, they planted Rhodes grass using overhead sprinkler irrigation, which requires a lot of water,” Rhonda Janke, of SQU’s Crop Science Department, told OBG.

Livestock

Another reason for planting animal fodder may be to cater to a small increase in the size of livestock herds. In 2015 there were 374,000 cows, 253,000 camels, 570,000 sheep and 2.17m goats in the sultanate, and each of the herds had grown by 2% compared to 2014, according to NCSI figures.

In step with the rise in herd sizes, red meat and milk production increased by 2.4% and 2.2%, respectively, with 43,000 tonnes of meat and 93,000 tonnes of dairy items produced in 2015. The scale of poultry and egg production remained unchanged from 2014 to 2015, when 43,000 tonnes of poultry and 285m eggs were sold by Omani farms.

Food Trade

However, Oman’s imports and exports of food and live animals in 2015 demonstrate that self-sufficiency is a distant prospect for any category with the exception of fish. NCSI figures show that if fish products are left out of the assessment, the sultanate imported 2.93m tonnes of foodstuffs with a combined value of OR1.12m ($2.9m) and exported 705,525 tonnes with a value of OR387,865 ($1m), resulting in a net import of 2.2m tonnes of food produce worth OR718,835 ($1.9m). When the sale price of exports is deducted from the cost of imports, the most expensive categories were cereals (OR179,201, $465,000); fruits and vegetables (OR145,843, $379,000); dairy products and eggs (OR127,701, $332,000); and meats (OR109,206, $284,000).

Although Oman exports more fish and fish products than it imports, the impact on the overall balance of payments for food products is modest. In 2015 the country exported 121,332 tonnes of fish with a value of OR53,263 ($138,300) and imported 27,800 tonnes with a value of OR26,000 ($67,500). This meant that its net fish exports were 93,532 tonnes, with a total value of OR27,263 ($70,800).

Fisheries

The total weight of fish landed grew every year from 2006 to 2015, when it reached 257,172 tonnes. Of this, 254,767 tonnes was brought ashore by fishing crews in traditional artisanal boats working fairly close to the coast and 2024 tonnes was caught closer to shore. The impact of commercial fishing vessels operating further offshore has dwindled from a peak catch of 25,702 tonnes in 2009 to just 210 tonnes in 2015. Similarly, aquaculture made a modest contribution of 170 tonnes in 2015, down from a peak of 353 tonnes in 2013. In 2015 the Ministry of Agriculture and Fisheries (MAF) granted licences to 46,837 fishermen and 22,921 boats in the traditional fleet.

The 2015 catch included 61,141 tonnes of demersal fish, including emperor, sea bream and grouper; 8069 tonnes of sharks and rays; 6529 tonnes of crustaceans, including 995 tonnes of shrimp, of which 150 tonnes were produced on fish farms; 68,222 tonnes of large pelagic, including 30,000 tonnes of tuna; and 110,613 tonnes of small pelagic.

In its ninth five-year plan the government has identified fisheries as one of five key sectors of the economy that should be prioritised for development in line with economic diversification goals. It has set a goal of increasing production to 480,000 tonnes by 2020, creating an additional 20,000 jobs in the sector.

Port Development

Central to this objective is the sultanate’s strategy to leverage its location by developing ports that enable ships to call at the Arabian Peninsula, and serve the countries north of Oman, without having to navigate the Strait of Hormuz.

The development of the port of Duqm will have a particular impact on the fishing industry. In January 2016 the Special Economic Zone Authority for Duqm, commonly known as SEZAD, floated tenders for a six-metre-deep, 600-ha fishery harbour that includes a 3.4-km quay with provisions for associated processing and canning facilities. The idea is eventually to have as many as 60 fish manufacturing facilities, including cooling and freezing stores, and fish farming facilities, as well as centres dedicated to training and research to serve and promote the fishing industry. “30% of Oman’s fish come from Duqm. Apart from the specialised fishing harbours that are already being built, we are currently exploring opportunities for further downstream processing and added-value activities in the area,” Yahya bin Said bin Abdullah Al Jabri, chairman of SEZAD, told OBG.

The development of Duqm as a focal point for the industry could have a significant impact on the processing, distribution and value of any of the fish landed at the port. A report on Oman’s fisheries sector produced by the Dutch government in December 2014 pointed out that most of its fishing fleet lacks refrigeration equipment, claiming that fishermen are forced to sell their catch on the day at “throwaway prices”.

Aquaculture

Although fish farms have struggled to expand significantly in Oman since they were introduced in 1986, with the establishment of a tiger prawn unit at a private farm, the government sees great potential in developing them. From August 7 to September 8, 2016, the MAF invited tenders for commercial aquaculture projects at a number of sites, ranging in size from 4.5 ha to 452.2 ha. These included land-based fish farms at three sites near Duqm, three more in the governorate of South A’Sharqiyah and another at Al Jiri in Muscat governorate. One of the sea-based farms is to be built at Dhabab, in Muscat.

According to a briefing document prepared by the MAF in 2011, the government anticipated fish farm production of 33,700 tonnes by 2025, split between 19,000 tonnes from shrimp ponds, 4300 tonnes of bream and cobia from sea cages, and a further 10,000 tonnes of fish to be produced in marine and freshwater recirculating aquaculture systems (RAS).

New Projects

A significant move in paving the way for a more profitable aquaculture sector came in June 2016, with the signing of an agreement to build a hatchery in Oman that will allow fish farms to restock with locally grown fingerlings (young fish) rather than going to the expense of importing stocks. The state-owned Oman Aquaculture Development Company and the MAF agreed to establish, operate and manage the Aquaculture Farming Centre at Al Bustan with the aim of producing 15m fingerlings annually.

Investment by the governments of Oman and Qatar is also helping to bring another aquaculture project to life. KAT-Aqua has been allotted 50,000 sq metres in Sur to develop a fish farm using RAS technology that aims to produce 600 tonnes of orange spotted grouper annually. The 2015 grouper catch by traditional methods in Oman was 2975 tonnes. In July 2016 KAT-Aqua, a project promoted by Knowledge Advanced Technology and Shumookh Investment Services, announced that Al Hosn Investment Company (HIC) had taken a 15% stake in the company. HIC is a 50:50 partnership owned jointly by Qatar Holding and Oman’s Ministry of Finance. “There is significant potential to use under-utilised offshore hectarage for fish farms and aquaculture developments, and this technology can be used all over the world,” Warith Al Kharusi, executive director at Al Safwa Group & Partners, told OBG. “With global fish stocks decreasing, the next green revolution will be the blue revolution.”

Innovation

The investment in KAT-Aqua is part of a new focus of innovation in agriculture and fisheries for HIC. Its subsidiary, Water and Life Agriculture, is pioneering the use of hydroponics in Oman. The technique, in which plants are grown in a solution of water and nutrients in greenhouse conditions using less water than traditional farming methods, has been used at the company’s farm near Barka for two years. In late summer 2016 the company was starting work on its second full winter crop of tomatoes, and had just completed its first summer of operations in which it also grew cucumbers, aubergines, chillies and herbs, which are sold either potted or pre-packed. The plants are grown under 8 ha of greenhouses and 2 ha of shade, and in 2016 it expected to produce more than 3000 tonnes, 95% of which goes into local shops and supermarkets. “As a locally grown product, the retailers have given us preferential prices and prominent displays, and people are now starting to recognise the brand,” Dereck Jakobi, general manager at Water and Life Agriculture, told OBG.

Agri-Business

Another of HIC’s agricultural investments has been the acquisition of a 10% stake in Mazoon Dairy Company, an OR100m ($259.7m) fully integrated dairy farm being built by the Oman Food Investment Holding Company (OFIC), the state-owned firm responsible for food security. Mazoon, which means rain clouds in Arabic, is being built on a 15-sqkm site west of the Hajar Mountains. Aquifers from the mountains run through the dairy site and on to the Empty Quarter in Saudi Arabia and the UAE. Animal waste generated at the farm will be used to produce power through a bio-waste facility on site, and project managers are examining ways to reduce water usage.

The farm is set to start with a herd of 3000 Holsteins producing just under 22m litres of milk per annum, with projected growth in 10 years to a herd of more than 14,000 cows producing just under 155m litres of milk per annum. The OFIC hopes to reduce import dependence for dairy products from 69% in 2014 to 13% in 2026. “The first animals will be coming in at the end of 2017, and we would expect to be producing our first milk by May 2018,” Patrick Gorman, Mazoon Dairy Company’s project farm manager, told OBG. OFIC is also developing projects to address domestic supplies of red meat and poultry. Oman currently controls 20% of its red meat supply, but the OFIC is looking to increase this to 52% through investments in the production of 55,000 tonnes of animal protein both domestically and in East Africa.

In partnership with existing poultry companies, OFIC established the A’Namaa Poultry Company with OR100m ($259.7m) in initial capital, with the aim of meeting 70% of domestic white meat demand by 2030. One of the partners in the new company is A’Saffa Foods, which has integrated poultry farms on a 40-sq-km site together with freezing, packing, processing and distribution channels across Oman. “Local foodstuffs production is insufficient to meet domestic demand, not to mention a ballooning regional market that is hungry for locally produced goods,” Muhammad Chaudhry, chief financial officer at A’Saffa, told OBG. “There are significant investment opportunities in capacity expansion and additional processing facilities, especially in light of the regional governments’ food security targets.”

Outlook

Each of the projects being backed by OFIC adopts a vertically integrated approach to food, including production, processing, packaging, distribution and marketing. The idea is to increase food security and make inroads into self-sufficiency, while also building powerful national consumer brands in meat and dairy products. There is also considerable scope for improved packaging, storage, processing and marketing of traditional produce such as sardines and dates for both domestic use and export, and for investment in technological improvements in the management of finite and scarce resources, such as ocean fish stocks and groundwater used in irrigation.